E*TRADE Financial Announces $2.5 Billion Investment Led by Citadel

E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today announced an
agreement that will result in a cash infusion of $2.5 billion. The
transaction, led by affiliates of Citadel Investment Group, includes
immediate funding of approximately $2.4 billion with the remaining
$150 million expected to fund by January 15, 2008. The investment
fortifies the Company´s balance sheet, allows the Company to focus on
its core retail business and provides additional capital to manage
credit risk.

E*TRADE also announced that, effective immediately, R. Jarrett
Lilien has been named acting Chief Executive Officer of the Company,
succeeding Mitchell H. Caplan, who has stepped down from the position
of CEO. Mr. Caplan will serve as an advisor to the Company on
transition matters through the end of the year. Mr. Lilien, who is
also a Director of the Company, has been E*TRADE FINANCIAL´s President
and Chief Operating Officer, leading the retail business since 2003.
The Company will conduct an executive search for the CEO position,
which will include Mr. Lilien and external candidates.

The Company also announced that Donald H. Layton, who has served
as a special advisor to the E*TRADE FINANCIAL Board of Directors, will
become Chairman of the Board, succeeding George A. Hayter who will
remain a Director of the Company. Mr. Layton retired in 2004 after 29
years at JP Morgan Chase and its predecessors, serving most recently
as Vice Chairman, and as a member of its three person Office of the
Chairman and its Executive Committee.

"E*TRADE´s core business is strong," said Mr. Lilien. "This
transaction with Citadel is not only a major vote of confidence from
one of the world´s leading financial institutions but also allows us
to directly address customer concerns and get back to our real
business, which is providing industry leading products and services to
our customers."

Mr. Layton said, "E*TRADE FINANCIAL´s Board of Directors, in
cooperation with our financial advisors, conducted a thorough and
robust review of strategic alternatives. As part of this process, the
Company held discussions with potential strategic and financial
partners. In the end, the Board unanimously concluded that the
transaction with Citadel clearly provides the greatest benefits to our
shareholders and other constituencies. The Company now has the
financial strength to aggressively compete in the marketplace."

"With its strong brand, solid business model and fortified balance
sheet, we believe E*TRADE is well-positioned to execute on its growth
strategy for its core retail business," said Ken Griffin, Founder and
CEO of Citadel Investment Group. "We believe this capital infusion
will restore investor and customer confidence in the Company, and will
allow the Board and management to continue to grow the business from a
position of strength, creating value for all shareholders."

This transaction removes the assets with the greatest market risk
from E*TRADE´s consolidated balance sheet. Effective today, E*TRADE
has divested itself of its $3 billion asset-backed securities (ABS)
portfolio, including its ABS collateralized debt obligations (CDOs)
and second lien securities.

E*TRADE FINANCIAL, with more than 4.7 million customer accounts
worldwide and $227 billion of assets under management as of October
31, is a global financial services leader. Its retail brokerage
business is recognized for its customer service, product innovation
and execution speed, and it maintains a "well-capitalized" status by
regulatory standards.

MANAGEMENT CHANGES

In addition to his position as acting CEO, Mr. Lilien will retain
his seat on the Company´s Board of Directors. Mr. Lilien joined
E*TRADE FINANCIAL in August 1999. Prior to his election as President
and COO in March 2003, Mr. Lilien served as Chief Brokerage Officer
and President, E*TRADE Securities LLC. Mr. Lilien has also served the
Company as Managing Director, Asia-Pacific and Latin America. He spent
10 years as Chief Executive Officer of TIR Holdings, which E*TRADE
FINANCIAL acquired in August 1999. Prior to TIR, he held various
positions at Paine Webber and Autranet, a former division of
Donaldson, Lufkin & Jenrette, Inc.

"Jarrett is a proven leader who has demonstrated vision and
effectiveness in many positions throughout the Company," said Mr.
Hayter. "We are confident that he is the right person to lead E*TRADE
forward as we focus on our core retail business."

"We value the contributions that Mitch has made to E*TRADE over
the past seven years, and the Board thanks him for his dedication and
service," continued Mr. Hayter. "Mitch played a vital role in reaching
this agreement with Citadel, and his passion has helped revolutionize
the online financial services industry, positioning E*TRADE as a
leader in value, customer service and product innovation."

"It has been an honor to work with E*TRADE´s employees, management
team, Board and customers as we transformed the Company. I am proud of
our accomplishments," said Mr. Caplan. "With today´s transaction, I am
pleased to pass on our Company as a strong, vibrant leader in
financial services."

TRANSACTION TERMS

Under the terms of the Citadel transaction, E*TRADE will receive
$2.5 billion in cash, of which $2.4 billion will fund today. The terms
include:

-- E*TRADE will receive $1.6 billion of capital in exchange for
12.5% senior unsecured notes and common stock. This includes a
contribution of capital by investment funds managed by
BlackRock, Inc.

-- Citadel has acquired E*TRADE´s entire ABS portfolio, including
CDOs, for $800 million in cash.

-- Upon final closing, it is expected that Citadel will invest an
additional $150 million in exchange for 12.5% senior unsecured
notes and common stock.

-- The amount of common stock expected to be issued by E*TRADE is
approximately 19.99% of current outstanding common stock.

-- Citadel will nominate one representative to E*TRADE
FINANCIAL´s Board of Directors.

As a result of the sale of the ABS portfolio, E*TRADE will take a
charge of $2.2 billion. The Company also expects to take a provision
in the fourth quarter related to its portfolio of home equity loans in
excess of the quarter´s expected losses that will result in an ending
allowance of over $400 million.

Evercore Partners Inc. and J.P. Morgan Securities Inc. served as
financial advisors to E*TRADE. Davis Polk & Wardwell served as legal
advisor to E*TRADE. Fried Frank Harris Shriver & Jacobson LLP served
as legal advisors to Citadel.

E*TRADE will hold an investor call and webcast today at 8:00 a.m.
Eastern Time to discuss this morning´s announcement. To participate in
the call, dial 800-683-1525. International callers should dial
973-872-3197. All callers should reference conference call ID 9510908.
The call will also be simultaneously webcast on the Company´s web site
www.investor.etrade.com.

A replay of the conference call will be available at
www.investor.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial
services including trading, investing, banking and lending for retail
and institutional customers. Securities products and services are
offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank and
lending products and services are offered by E*TRADE Bank, a Federal
savings bank, Member FDIC, or its subsidiaries.

About Citadel Investment Group

Citadel is a leading global financial institution focused on
alternative investment management and services. Founded in 1990,
Citadel deploys investment capital across a highly diversified set of
proprietary investment strategies in nearly every asset class. Citadel
deploys more than $17 billion in investment capital and employs 1,100
team members in Chicago, New York, San Francisco, Bermuda, London,
Hong Kong and Tokyo.

Important Notice

E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or
registered trademarks of E*TRADE FINANCIAL Corporation. The statements
contained in this news release that are forward-looking are based on
current expectations that are subject to a number of uncertainties and
risks, and actual results may differ materially. The uncertainties and
risks include, but are not limited to, changes in market activity,
anticipated increases in the rate of new customer acquisition, the
conversion of new visitors to the site to customers, the activity of
customers and assets held at the institution, seasonality, macro
trends of the economy in general and the residential real estate
market, instability in the consumer credit markets and credit trends,
rising mortgage interest rates, tighter mortgage lending guidelines
across the industry, increased mortgage loan delinquency and default
rates, portfolio growth, portfolio seasoning and resolution through
collections, sales or charge-offs, the development and enhancement of
products and services, competitive pressures (including price
competition), system failures, economic and political conditions,
changes in consumer behavior and the introduction of competing
products having technological and/or other advantages. Further
information about these risks and uncertainties can be found in the
information included in the annual reports previously filed by E*TRADE
FINANCIAL Corporation with the SEC on Form 10-K (including information
under the caption "Risk Factors") and quarterly reports on Form 10-Q.

(C) 2007 E*TRADE FINANCIAL Corporation. All rights reserved.